Rate: 8.0% at closing (1 Month LIBOR + 6.1%)
Term: 12 Months
Amortization: Interest Only
LTC: 70% of lender approved costs
Guaranty: Completion Guaranty; Capped Repayment Guaranty
Lender Fee: 1.0%; 0.25% rebate to sponsor if loan paid off in less than 9 months
GSP successfully placed $13,700,000 in first mortgage financing for completion of construction on an approximately 10,000 square foot luxury single-family residence in Beverly Hills. The 12-month initial term has two three-month extension options with a 0.375% fee payable per extension, and Interest Only payments during the life of the loan. If the loan is paid off in less than nine months, the sponsor benefits from a 0.25% rebate on the 1.0% lender loan origination fee.
The loan funds up to 70% of lender-approved costs and the interest rate floats at 1-Month LIBOR plus 6.1% (8.0% coupon at closing). The cash neutral transaction allowed the sponsor to refinance out of a prior construction loan and release $1,500,000 from a pledge account with the prior lender in order to free up equity.
The offshore sponsor provided a completion guaranty and a repayment guaranty capped at $5,000,000.
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Related Financings
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$23,000,000 Construction to Perm Financing at 74% LTC Fixed Rate, Lone Tree, CO
October 31, 2018
Transaction Description:
George Smith Partners secured $23,000,000 in proceeds for the ground up construction of an 80,000 square foot medical office property in Lone Tree, Colorado. The Property consists of a 4.8-acre site located directly across from a hospital campus (Sky Ridge Medical Center). The total project cost is a little over $31M and the loan represents 74% LTC. The Property is only 10% preleased, but it has drawn in a great deal of interest, from potential tenants. The Project is now under construction. This loan was high leverage on a spec deal; 5.25% fixed rate locked at application with 7-year term and non-recourse at stabilization.
Challenges and Solutions:
The first challenge was proving Sponsor’s rent proforma which was much higher than the comps which ranged between $21-24 NNN. With the help of the Appraiser and the Sponsor, GSP was able to get the Lender comfortable with the higher proforma. This was achieved due to the Property’s proximity to the Hospital. This location offers the tenants the ability to be close to the hospital without being subject to hospital use restrictions, approval and oversight. The second challenge was starting the Project prior to the rain and snow season. The Lender was able to fund 2 weeks earlier than originally planned enabling the start of construction.
Rate: 5.25%
Term: 24-month construction period rolling into a 5-year permanent loan
Amortization: 36-month Interest Only then 25 years
LTC: 74%
Lender Fee: 1.0%